Group 1 - Guess? Inc. (GES) is an American apparel retailer founded in 1981 and became publicly traded in 1996 [1] - The article discusses the share price performance of Guess? Inc. since its IPO [1] Group 2 - The analyst expresses a focus on investing at the intersection of value and growth, particularly in small-cap stocks [1] - The investment strategy includes looking for long-term compounders and special situations [1]

Group 1 - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] - The methodology allows for a flexible approach to investing, not confined to traditional categories such as value, dividend, or growth investing, but rather assessing all prospects of a stock to evaluate risk-to-reward [1] Group 2 - There is a potential interest in initiating a long position in GES within the next 72 hours, indicating a strategic move based on the analysis presented [2] - The article expresses personal opinions of the author without any compensation from companies mentioned, ensuring an unbiased perspective [2]

Core Viewpoint - Guess?, Inc. is facing significant challenges in its operating environment, particularly in North America and Asia, leading to a notable decline in stock performance and revised financial projections [1][8]. Financial Performance - In the third quarter, comparable sales in North America fell by 15%, while in Asia, constant currency comparable sales dropped by 16%, primarily due to weak demand in key markets like China and South Korea [2]. - The company's gross margin contracted by 110 basis points to 43.6%, and SG&A expenses increased by 180 basis points to 37.8% of sales, resulting in an adjusted operating margin of 5.8%, down from 8.9% a year ago [5]. Cost Pressures - Freight costs have significantly impacted the company's operations, with an additional $5 million in freight-related expenses anticipated for the fourth quarter due to the Red Sea crisis [4]. - The company is experiencing pressure from rising marketing expenditures, occupancy costs, and an unfavorable channel mix, contributing to operational inefficiencies [5]. Revised Outlook - The company has lowered its fiscal 2025 revenue growth expectations to a range of 7.1% to 8.1%, down from a previous forecast of 9.5% to 11%, and adjusted earnings per share are now projected between $1.85 and $2, compared to the earlier range of $2.42 to $2.70 [8]. Strategic Initiatives - The acquisition of rag & bone has strengthened Guess?'s multi-brand portfolio, with plans for expansion into high-potential markets such as Europe, the Middle East, and Canada [9]. - The wholesale business in the Americas has shown robust growth, with revenues surging 79% year over year in the third quarter, driven by internalizing the outerwear business [9]. Digital Strategy - The company is focusing on digital growth, evidenced by a 16% year-over-year increase in European e-commerce sales in the third quarter [10]. - A new loyalty program in Europe aims to enhance customer retention through cross-border point redemption and improved personalization efforts [10].

Acquisition and Integration - The acquisition of rag & bone was completed on April 2, 2024, integrating it into existing segments for financial reporting purposes[212]. - Inventory increased by $113.4 million, or 20.2%, to $675.8 million, primarily due to the rag & bone acquisition and higher in-transit inventory[258]. - Accounts receivable increased by $42.6 million, or 12.5%, to $383.4 million, driven by the rag & bone acquisition[259]. - Net revenue from the Americas Wholesale segment increased by $44 million, or 79%, driven mainly by the newly acquired rag & bone business[284]. - Gross profit increased by $31 million, driven by the impact of newly acquired businesses, including rag & bone[267]. Financial Performance - Net loss attributable to Guess?, Inc. was $23.4 million, or diluted net loss per share of $0.47, for the quarter ended November 2, 2024, compared to net earnings of $55.7 million, or diluted net earnings per share of $0.82, for the quarter ended October 28, 2023[247]. - Total net revenue increased 13.4% to $738.5 million for the quarter ended November 2, 2024, compared to $651.2 million in the same prior-year quarter[249]. - Gross margin decreased 110 basis points to 43.6% for the quarter ended November 2, 2024, compared to 44.7% in the same prior-year quarter[249]. - SG&A expenses increased 19.3% to $279.4 million for the quarter ended November 2, 2024, compared to $234.1 million in the same prior-year quarter[250]. - Operating margin decreased 270 basis points to 5.7% for the quarter ended November 2, 2024, compared to 8.4% in the same prior-year quarter[253]. Economic and Market Conditions - The ongoing wars in Ukraine and Gaza, along with macroeconomic conditions, are negatively impacting business operations[207]. - Inflationary pressures have impacted overall cost structure, including transportation, employee compensation, and raw materials, negatively affecting margins and expenses[218]. - Continued inflationary conditions could adversely impact consumer discretionary spending, negatively affecting sales and results[222]. - The average U.S. dollar rate was stronger against several currencies, negatively impacting the translation of international revenues and earnings for the nine months ended November 2, 2024[216]. - Currency fluctuations can significantly impact the translation of international revenues and earnings into U.S. dollars, affecting operating margins[214]. Operational Challenges - The company has experienced increased costs and transit times associated with deliveries related to operations in Russia due to sanctions and new procedures[227]. - The company continues to strategically manage expenses to protect profitability amid supply chain disruptions, including the Red Sea crisis[208]. - The company continues to assess operations in Russia to ensure compliance with applicable sanctions, with no material impact on operations to date[228]. Shareholder Returns and Capital Management - The company plans to prioritize capital allocation toward investments that support growth and infrastructure while managing product buys and inventory ownership rigorously[237]. - A special cash dividend of $2.25 per share was announced on March 20, 2024, in addition to a regular quarterly cash dividend of $0.30 per share[348]. - The company repurchased 2.6 million shares at an aggregate cost of $60.8 million during the nine months ended November 2, 2024, under the 2024 Share Repurchase Program[353]. - The company plans to return value to shareholders through dividends and share repurchases while considering strategic acquisitions that leverage its global infrastructure[237]. Tax and Compliance - The effective income tax rate was an expense of 128.9% for the quarter ended November 2, 2024, compared to a benefit of 44.5% in the same prior-year quarter[254]. - The effective income tax rate was 355.1%, compared to a benefit of 6.3% in the prior year, primarily due to a net unrealized loss on derivatives[305]. - The company is monitoring the OECD Pillar 2 guidelines, which may affect its future tax rate starting in 2024[306]. Cash Flow and Liquidity - As of November 2, 2024, cash and cash equivalents decreased to $140.9 million from $244.1 million as of October 28, 2023[255]. - Net cash used in operating activities was $61.6 million for the nine months ended November 2, 2024, compared to net cash provided of $40.9 million for the same prior-year period, indicating a deterioration of $102.4 million[338]. - The company anticipates satisfying ongoing cash requirements for at least the next 12 months primarily through cash flow from operations and existing cash balances[333]. Strategic Focus and Future Plans - The company plans to focus on increasing productivity in existing markets and pursuing brand extensions and category expansions for revenue growth[233]. - The company aims to enhance customer experience through a seamless omni-channel strategy and expand its digital business[234]. - The company intends to operate with high efficiency and effectiveness, leveraging technology and data analytics to improve operations and decision-making[236]. - The company aims to design and extend its product offerings to better address local product needs and support various lifestyle occasions[235].

Financial Data and Key Metrics Changes - The company reported a revenue growth of 13%, reaching $739 million, slightly below expectations due to a stronger US dollar [6][32] - Adjusted earnings per share (EPS) for the quarter was $0.34, compared to $0.49 in the same quarter last year [42] - Total company gross margin was 43.6%, which is 110 basis points lower than the previous year [39] Business Line Data and Key Metrics Changes - The core Guess business saw low single-digit revenue growth, while the Americas wholesale business increased by approximately 79% due to the addition of Rag & Bone [34][36] - European wholesale revenue grew by 7% in US dollars, with retail comps increasing by 8% [34] - The licensing segment's revenues were flat, despite internalizing outerwear [38] Market Data and Key Metrics Changes - In Europe, retail comps increased by 5% in constant currency, while in Asia, retail comps decreased by 16% [35][38] - The Americas retail business experienced a 14% constant currency comp decline, with an operating loss margin of 4.3% [36] - The company faced challenges in North America and Asia, with traffic headwinds impacting sales [48] Company Strategy and Development Direction - The company is focused on leveraging its platform to support the expansion of multiple brands, including Rag & Bone and Guess Jeans [17][29] - There is an emphasis on enhancing marketing capabilities and customer engagement to improve brand relevance [24][25] - The company is reevaluating pricing strategies in response to consumer sentiment and competitive pressures [9][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of a stronger US dollar and inflation on consumer behavior, leading to adjustments in revenue expectations for the fourth quarter [15][50] - The company is optimistic about long-term growth opportunities, particularly with Rag & Bone and the Guess Jeans brand [31][62] - Management highlighted the importance of adapting to market conditions and consumer preferences to reclaim brand strength in North America [30][78] Other Important Information - The company increased marketing and advertising investments by approximately 85% compared to the previous year [12] - Inventory levels rose by 20% year-over-year, influenced by the acquisition of Rag & Bone [43] - The company expects full-year revenues to be slightly below $3 billion, with growth between 7% and 8% [15][51] Q&A Session Summary Question: Insights on Q4 revenue growth and operating margin opportunities - Management noted that early shipments in Europe contributed about $10 million to Q3 revenue, which would impact Q4 [58] - They expressed confidence in achieving double-digit operating margins in the long term despite current challenges [62] Question: Shift to a universal product offering and its impact - Management confirmed the success of the global product line in Europe but acknowledged challenges in the US market [75][76] - They emphasized ongoing efforts to elevate the brand and improve customer engagement through targeted marketing [79][80] Question: Response to potential tariff increases - The company is actively reducing dependency on China and exploring alternative sourcing options to mitigate tariff impacts [86]

Guess?, Inc. (GES) posted third-quarter fiscal 2025 results, wherein the top and bottom lines fell short of the Zacks Consensus Estimate and earnings declined year over year. Revenues increased year over year, mainly backed by the rag & bone buyout (concluded in April 2024) and modest growth in the company’s core businesses. The company is lowering its earnings and revenue outlook due to external challenges, including currency fluctuations, elevated freight costs and increased taxes. GES also anticipates th ...

Group 1 - Guess?, Inc. (NYSE: GES) shares have declined by 20% over the past year due to a sluggish consumer environment [1] - The company's disappointing Q3 results are not expected to improve its performance [1]

Core Viewpoint - Guess (GES) reported quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.43 per share, representing a -20.93% earnings surprise [1] - The company posted revenues of $738.52 million for the quarter ended October 2024, missing the Zacks Consensus Estimate by 1.66% [2] Financial Performance - Earnings per share decreased from $0.49 a year ago to $0.34 this quarter [1] - Revenues increased from $651.17 million a year ago to $738.52 million this quarter [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Guess shares have lost approximately 21.8% since the beginning of the year, contrasting with the S&P 500's gain of 25.5% [4] - The current Zacks Rank for Guess is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The current consensus EPS estimate for the coming quarter is $2.04 on revenues of $989.5 million, and for the current fiscal year, it is $2.63 on revenues of $3.06 billion [8] - The estimate revisions trend for Guess is mixed, and future earnings expectations will depend on management's commentary during the earnings call [3][5] Industry Context - The Textile - Apparel industry, to which Guess belongs, is currently in the top 20% of over 250 Zacks industries, indicating a favorable outlook [9] - Another company in the same industry, Oxford Industries (OXM), is expected to report a significant decline in earnings, with a consensus EPS estimate of $0.11, representing a year-over-year change of -89.1% [10][11]

Financial Performance - Revenues for the third quarter of fiscal 2025 increased to $739 million, up 13% in U.S. dollars and 14% in constant currency[2]. - GAAP net loss for the third quarter was $23.4 million, with a GAAP loss per share of $0.47, compared to GAAP net earnings of $55.7 million and EPS of $0.82 in the same prior-year quarter[7]. - Adjusted net earnings decreased 35% to $17.7 million, with adjusted diluted EPS of $0.34, down 31% from $0.49 in the same prior-year quarter[8]. - The Company expects consolidated net revenue for the fourth quarter of fiscal 2025 to increase between 2.2% and 5.4%, and for the full fiscal year 2025 to increase between 7.1% and 8.1%[41]. - GAAP diluted EPS for the fourth quarter of fiscal 2025 is projected to be between $1.10 and $1.22, while for the full fiscal year 2025, it is expected to be between $0.70 and $0.82[41]. - The adjusted diluted EPS outlook for the fourth quarter of fiscal 2025 is between $1.37 and $1.52, and for the full fiscal year 2025, it is between $1.85 and $2.00[43]. - The Company anticipates free cash flow for the full fiscal year 2025 to be approximately $135 million[44]. - The Company reported a total net revenue of $2.06 billion for the nine months ended October 28, 2023, a 9% increase from $1.89 billion in the same period last year[76]. Revenue Segments - Americas Wholesale revenues increased 79% in U.S. dollars and 83% in constant currency for the third quarter[12]. - Europe revenues increased 7% in U.S. dollars and 6% in constant currency, with retail comparable sales up 8% in U.S. dollars[10]. - Licensing segment revenues remained flat, while Asia revenues increased 2% in both U.S. dollars and constant currency[12][13]. - The Americas Retail segment experienced a 12% revenue growth, reaching $172.8 million, up from $153.9 million year-over-year[73]. - Europe segment revenue increased by 7% to $368.4 million for the three months ended October 28, 2023, compared to $344.5 million in the prior year[76]. Expenses and Margins - GAAP operating margin decreased to 5.7% from 8.4% in the same prior-year quarter, driven by higher expenses and unfavorable channel mix[14]. - Gross profit margin decreased to 43.6% in Q3 2024 from 44.7% in Q3 2023, with gross profit amounting to $321,877,000[63]. - Selling, general and administrative expenses rose to $279,389,000, representing 37.8% of net revenue, compared to 36.0% in the prior year[63]. - Total cost of product sales increased to $416,641,000, representing 56.4% of net revenue, compared to 55.3% in the prior year[63]. - The adjusted operating margin for the total company was 5.8% for the three months ended October 28, 2023, down from 8.9% in the prior year[73]. Shareholder Actions - The Board of Directors approved a quarterly cash dividend of $0.30 per share, payable on December 27, 2024[45]. - The Company repurchased approximately 2.6 million shares for $60.3 million during the nine months ended November 2, 2024, leaving a capacity of $139.8 million under the share repurchase program[47]. Acquisitions and Market Presence - The rag & bone acquisition completed on April 2, 2024, integrated into existing segments, contributing to revenue growth[6]. - The Company acquired all operating assets and a 50% interest in the intellectual property assets of rag & bone on April 2, 2024, expanding its market presence[54]. - As of November 2, 2024, the Company operated 1,057 retail stores directly and an additional 541 stores through partners and distributors worldwide[54]. Future Outlook - The company expects current consumer sentiment and slow customer traffic in North America and Asia to persist, negatively impacting fourth quarter performance[3]. - The company anticipates that foreign currency exchange rates will remain at recently prevailing rates for the fourth quarter and full fiscal year 2025[89]. - The outlook for fiscal 2025 excludes certain costs related to professional services, transaction costs from the rag & bone acquisition, and asset impairment charges[90]. Tax and Other Financial Metrics - The company reported an effective income tax rate of 36.6% for the current quarter, compared to 30.9% in the same quarter last year[64]. - The adjusted effective income tax rate for the nine months ended October 28, 2023, was 35.7%, compared to 28.8% for the same period last year[67]. - The company incurred $1,091,000 in asset impairment charges for the three months ended October 28, 2023[67]. - The company reported a loss on extinguishment of debt of $1,952,000 for the nine months ended October 28, 2023[67]. Cash Flow and Assets - Cash and cash equivalents decreased to $140.9 million from $244.1 million year-over-year[79]. - Net cash provided by (used in) operating activities for the nine months ended November 2, 2024, was $(61,555) thousand, compared to $40,881 thousand for the nine months ended October 28, 2023[82]. - Free cash flow for the nine months ended November 2, 2024, was $(130,391) thousand, a significant decrease from $(16,486) thousand for the same period last year[82]. - Total assets increased to $2.79 billion as of November 2, 2024, compared to $2.48 billion as of October 28, 2023[79].

Core Viewpoint - Guess?, Inc. is expected to report revenue growth of 15.3% year-over-year for Q3 fiscal 2025, with revenues estimated at $751 million, while earnings per share are projected to decline by 12.2% to 43 cents [1][3]. Group 1: Factors Likely to Fuel Results - The company is experiencing strong brand momentum globally and positive customer responses across various product categories [3]. - Key strategies include enhancing organizational culture, focusing on customer needs, and maintaining brand relevance among different consumer groups, including heritage, Millennials, and Generation Z [3]. - The acquisition of rag & bone is anticipated to positively impact Q3 results, alongside strong performances in the wholesale business, particularly in European and American markets [4][5]. Group 2: Expected Challenges - The company faces challenges in a dynamic shopping environment where consumers are more selective and sensitive to pricing [6]. - High operating costs, particularly due to increased freight costs from shipping issues related to the Red Sea crisis, are expected to impact gross margins and profits [6]. - The adjusted operating margin is projected to decline to between 4.7% and 5.8%, down from 8.9% in the same quarter last year [7]. Group 3: Earnings Predictions - The adjusted earnings per share for Q3 are forecasted to be between 33 and 45 cents, indicating a decrease from 49 cents reported in the previous year [7]. - The company holds a Zacks Rank of 3 and an Earnings ESP of 0.00%, suggesting that the model does not predict an earnings beat this time [8].